Industry Minister Tony Clement speaks to reporters in the foyer of the House of Commons on April 7, 2009.
Ottawa will scrutinize any state-owned company bid for Potash Corp. of Saskatchewan Inc. to ensure its motives are in line with a free-market economy and not government interests, highlighting the challenge for a Chinese player to rival BHP's $38.6-billion (U.S.) hostile offer.
Citing the Investment Canada Act's rules on takeovers by state-owned enterprises, Industry Minister Tony Clement said Monday that any bid for Saskatoon-based Potash Corp., the world's largest potash producer, would have to include a commercial benefit to Canada.
"We have specific rules about state-owned enterprises … to ensure that they are acting in a way that is consistent with a market-based economy, rather than as an agent for a foreign government's interests," he said during a call with media during a visit to China.
A rival bid to BHP's offer is expected to come from a state-owned company in China because the country has the financial means as well as the desire to secure a potash supply to feed its growing and increasingly affluent population. China currently imports about half of its requirements for potash, an ingredient used in fertilizer to boost crop yields.
Mr. Clement claims the issue has not come up in his five days of meetings in China, which have focused on promoting business relations between Canadian and Chinese firms, and that any discussion about a bid is "theoretical at this point."
The comments came the same day Potash Corp. sent a note to shareholders reiterating that talks are ongoing with "a number of third parties" interested a possible counterbid.
"We believe BHP will not be the only bidder in this process, as we continue to seek to maximize value for all of our stakeholders," Potash Corp. chief executive Bill Doyle said in the letter dated Sept. 13.
Chinese chemical firm Sinochem Group is trying to form a consortium of bidders to mount a rival bid to BHP's $130-per-share offer, according to sources. Canadian pension funds, including Alberta Investment Management Corp. (AIMCo), as well as foreign sovereign wealth funds have been contacted to join a rival bidding group. Canadian pension funds or companies are seen as key to help any potential bid receive Ottawa's approval.
The Saskatchewan government has expressed concern about a state-owned firm buying Potash Corp., believing its goal of securing supply will result in ramped up production, which will in turn drive down potash prices. That will mean lower revenues for the province through potash royalties. The government has hired the Conference Board of Canada to review any takeover bid of Potash Corp., which is one of the province's largest taxpayers. The province's opinion on any bid for the company will influence Ottawa's decision on whether it should be approved.
As part of its assessment of a state-controlled company's acquisition of a Canadian firm, Ottawa looks at money spent to keep the Canadian business in a globally competitive position, as well as its commercial operations when it comes to exporting and processing.